2015 Budget: ISAs and Pensions still to the fore

The information provided in this article was accurate at the time of publishing and should be read in the context of the date it was published. Views in this article are those of the author alone and do not necessarily represent the view of Scottish Friendly.

Now the dust has somewhat settled on Wednesday’s Chancellor’s Budget statement, it’s clear it was rather a damp squib.   With only a few weeks to the General Election, it was perhaps going to be nothing else than a political budget.

After the 2014 Budget which witnessed Mr Osborne pulling quite a few rabbits from his top hat, this Budget was perhaps more one of shooting some (Labour party) foxes.  Prime among these was the reduction in the life-time pension allowance from £1.25 million to £1 million.   The Labour party were advocating this as one of their election pledges and with the savings in tax relief this would raise, they’d be able to reduce student tuition fees.   Mr Osborne, however, has stolen Mr Balls’s thunder.

Pensions were also to the fore in this budget with the confirmation that people with annuities will be able to trade them in for cash.   As Scottish Friendly’s Neil Lovatt, most recently on Channel 4 News, says:  “There’s a lot of people that as a result of the pension changes will be taking money out of their pension, putting it into buy-to-let property and in so doing inflating property and rent prices.”

As well as pensions, in principle it was good to see that savings and investments once again had a high profile in this year’s Budget.

The Help to Buy ISA for young people who are struggling to build a deposit may provide some light relief to help young people get on the housing ladder.

However, juggling with tax reliefs is no way to solve the housing crisis, given that this problem is something that has been caused by successive governments over the last four decades.  The country is screaming out for a more holistic approach to the housing problem.

It’s welcome news for savers that, from autumn, they will able to withdraw and replace cash ISA money during a given tax year without affecting their overall tax-free limit.  Why, though, doesn’t this apply to stocks and shares ISAs too?

It’s good news that the first £1,000 of general savings will be tax free as it will give people that little bit more interest on their hard earned savings. With better value on deposit accounts, this change means however, that cash ISAs are now likely to become the preserve of higher rate taxpayers – although it has to be questioned if there is any future for the cash ISA.

With the news that the personal tax allowance is to be increased to £11,000, more people are going to have extra money in their pockets.

Continuing low interest rates, higher returns on savings and investments and less tax on earnings all provide strong foundations for a healthier savings and investment culture in the UK.   We simply have to get our savings ratio to a more healthy level if we are going to be able to ride out the vicissitudes of economic cycles and we are encouraged that the Government is putting greater weight behind this.

No advice has been provided by Scottish Friendly. If you are in any doubt as to whether a savings or investment plan is suitable for you, you should contact a financial adviser for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting www.unbiased.co.uk. Advisers may charge for providing such advice and should confirm any cost beforehand.